A collection of observations, news and resources on the changing nature of innovation, technology, leadership, and other subjects.

April 09, 2012

The Complex Transition to the Age of the Cloud

In June of 2008 I participated in a conference on cloud computing. After a full day of talks and discussions, the sense of the meeting was that cloud computing has the promise to bring a real paradigm shift to the IT world, although, as the conference organizer succinctly put it in his closing remarks: “There is a clear consensus that there is no real consensus on what cloud computing is.” In other words, something big and profound seems to be going on, although we are not totally sure what it is yet.

Where are we now, almost four years later? Just about everyone agrees that cloud computing is one of the major trends in IT, with important implications not only to IT but to business and society in general. Many books and articles have been written on the subject. A number of companies have cloud-based offerings in the marketplace, with more to come. But, while many of us feel that cloud is even bigger and more profound than we thought back in 2008, lots of questions remain on its intrinsic nature and its value to the business.

He writes that cloud computing is “ . . . a sea change - a deep and permanent shift in how computing power is generated and consumed. It’s as inevitable and irreversible as the shift from steam to electric power in manufacturing, which was gaining momentum in America about a century ago.”

But, after discussing a number of its benefits to business, - individual productivity, group collaboration, information insights and application development, - McAfee points out that the shift to cloud computing has been slow. He cites a 2011 survey by InformationWeekthat found that less that 30% of respondents had analyzed the impact of cloud to their business, as well as a prediction by the research firm Gartner that while cloud computing will continue to grow at almost 20 percent a year, it will account for less than 5 percent of totally IT spending in 2015.

“At present, there’s a lot of uncertainty and skepticism around the cloud, particularly among technology professionals who have deep expertise with, or attachment to, on-premise computing,” McAfee adds. “Companies shouldn’t give such people too much influence over plans to move into the cloud; that would be like putting the crew that ran the boiler and steam turbine in charge of electrifying a factory. The CEO and other senior business executives need to take responsibility for bringing their organizations into the era of cloud computing.”

For a number of years I’ve been convinced that cloud computing truly represents a major transformation in the way all institutions, from the smallest to the largest, will leverage information technologies. But, as a number of studies have pointed out, it is also a key factor, perhaps the key factor, in the way IT will be organized and managed in the future. “The IT function of 2015 will bear little resemblance to its current state,” concludes one such report. “Many activities will devolve to business units, be consolidated with other central functions such as HR and Finance, or be externally sourced.”

While the skeptics’ concerns, - security, reliability, privacy, costs and others, - are quite real, the hardest part of implementing cloud strategies has little to do with technology. It has mostly to do with governance, policies, and regulations, as well as with cultural and organizational issues. Disruptive transformations are never easy, especially to the people and organizations being disrupted, which is why their early uptake is usually slower than anticipated. But, eventually, the inevitability and value of the transformation becomes clear to everyone, at which point it takes off.

This, I am convinced, will be the case with cloud. We are basically seeing the emergence of a new model of computing in the IT world. For the IT industry, a new computing model is a very big deal. In the fifty plus years since there has been an IT industry, this would be only the third such model, centralized and client/server computing being the two previous ones. We are entering the Age of the Cloud.

While the Internet and World Wide Web have been with us for almost twenty years, it’s only been in the past few years that digital technologies have started to penetrate just about every nook and cranny of the world around us. Billions of people are now walking around with mobile devices, most of which will become smarter over the next few years, that is, able to handle a large variety of sophisticated apps. In addition, digital technologies are enabling us to instrument, interconnect and make just about everything more intelligent - cars, appliances, medical equipment, roadways, pipelines, pharmaceuticals and livestock. We can use real time information and powerful analytics to help us understand and optimize the very way everything works in an attempt to make the world more efficient and smarter.

This is the essence of the Age of the Cloud. Cloud-based solutions are needed to integrate and manage these huge numbers of people and devices. Over time, companies will cloud-enable their legacy IT infrastructures and applications, much as they web-enabled them in the 1990s.

But, for the most part, today’s IT infrastructures are not up to the task without undergoing major change. Many companies have not exercised the needed discipline in their IT operations. They have allowed different departments in their organization to architect their own systems and applications. As a result, these disparate systems do not work well with each other, application take a long time from development to deployment, and systems management costs are quite high.

To effectively cloud-enable their IT operations in order to support all those people, devices, information and applications, IT organizations must embrace a more standardized, process oriented, industrialized management approach. Ad-hoc, custom IT infrastructures will not be able to achieve the kinds of volumes, costs and quality needed to successfully compete in the emerging cloud computing marketplace.

Nicholas Carr nicely framed the historical shift to cloud computing in his 2008 book, The Big Switch. He uses as an analogy the evolution of power plants. In the 19th century, companies usually generated their own power with steam engines and dynamos. But with the rise of highly sophisticated, professionally run electric utilities, companies stopped generating their own power and plugged into the newly built electric grid.

As technologies become ubiquitous in society, - electricity, telephones, cars, TVs - a much more disciplined, engineering oriented approach is needed in how they are consumed and delivered. IT is now going through a similar transformation. Many IT capabilities, now handled in a distributed way, are being centralized into highly industrialized, efficient, scalable data centers. This evolution is happening in a variety of ways.

Some companies are developing private clouds to deliver those internal applications they want to offer as company-wide cloud services, that is, with the proper scalability, quality, costs and discipline. Others are acquiring IT or business services from the growing number of companies offering such services in the marketplace. Most companies are embracing a hybrid model - delivering some services from its own data centers, and acquiring others from service providers. And, a growing number of companies are transforming their private clouds into new revenue producing businesses, offering these cloud-based services to everyone in the marketplace.

The opportunity to significantly reduce costs and improve quality while exploring new sources of revenue and growth is compelling. But, this transition should be viewed as a long term evolution. Cloud computing is a highly complex initiative - at the technical, business and organizational levels. And, one of the key lessons we all hopefully learned from the dot-com era is that complex, global initiatives take time. It is very nice to be motivated by lofty aspirations, but in the end, it is all about marketplace execution.

While none of us can predict how things will play out, and even less how long it will take, the transition to the Age of the Cloud does seem inevitable. It is thus very important for companies to get on the learning curve, formulate the cloud strategy that works best for them and start implementing cloud-based projects, so they can learn from their actual experiences. If they do so, they will be able to keep up with whatever direction this exciting initiative takes in the future.